Music City Center's roof in the foreground with the new Omni Hotel under construction behind it in June 2013 / Sanford Myers / File / The Tennessean

Written by

Joey Garrison

The Tennessean

Grabbing a beer in downtown Nashville? It will soon mean an extra penny to help Music City Center recruitment.

By a 32-4 vote, the Metro Council on Tuesday easily approved a new 0.25 percent fee — a quarter of a penny for every dollar — on the price of services, food, beer and other goods sold within the downtown central business district.

The fee, which equates to a penny on the price of a $4 beer, gives tourism officials a new dedicated pool of money they say is crucial to lure top-tier conventions to Nashville.

The plan, the creation of the Nashville Convention and Visitors Corp. and one unlike any other in Tennessee, will use a projected $1 million in annual revenue as incentives to convention groups that are considering holding events in Nashville.

The tactic: subsidizing the rent that organizations pay to use the city’s new $585 million convention center, which can exceed more than $200,000. All expenditures would require approval from Metro’s Event Marketing Committee.

“This fee, contrary to what a few folks believe, doesn’t go to pay for the Music City Center,” said Councilman Ronnie Steine, who voted for it. “It goes into a fund to bring business to our community.”

Downtown patrons won’t pay the new fee until next year.

The Nashville Convention and Visitors Corp. successfully lobbied for the passage of a new state law last spring that enabled Metro to enact the fee. Butch Spyridon, the corporation’s president, has likened the new fund to a “war chest” to compete with cities such as Atlanta, New Orleans and Chicago that have similar funds.

He has insisted it isn’t a sign that the new center is struggling. “We’re just trying to stay ahead of the curve,” he said.

Many downtown merchants, particularly owners of honky-tonks who helped start the conversation on the new fee, have said they won’t pass the cost down to their customers. They’ve rationalized the surcharge as simply one penny per every $4 beer sale.

“Conventions are big business, and everybody’s out there fighting,” said supporter Barrett Hobbs, operating partner of Silver Dollar Saloon, Whiskey Bent Saloon and other establishments in the Lower Broadway area. “We’ve got a great city and this is a great tool to help out our downtown businesses.”

Raises issues

Yet whether to absorb the extra fee is completely up to the discretion of merchants, leading some to question the arrangement.

Councilman Duane Dominy said he decided to vote against it after the city was unable to provide him a list of every downtown business it would apply to. “We have no way to control whether it’s passed down to (patrons) now or in the future,” he said.

Council members Robert Duvall, Emily Evans and Tony Tenpenny also voted against the plan.

Proceeds from the fee will be collected just like other sales tax revenue. By applying it to only certain goods and to a specific geographic area, it is referred to as a fee. It affects a 90-block area known as the Central Improvement Business District, which includes most of downtown.

The fee, which requires an initial $165,000 payment to the state and an annual $50,000 payment each subsequent year, does have exemptions: professional services, hotel lodging, tickets to sporting and other live events, and newspapers and other publications. Liquor sales would be exempt, but not beer sales.

Sales tax in Davidson County is 9.25 cents on every dollar, below Tennessee’s cap of 9.75 cents. Increasing Metro’s local option of the sales tax would require a public referendum.

Also Tuesday, the council voted to withdraw controversial legislation that would have sold $200 million in municipal bonds to reduce the city’s unfunded pension liability. The withdrawal came at the request of Mayor Karl Dean’s administration, which unveiled the proposal a week ago.

The plan was met with immediate scrutiny, leading Dean’s top aides to argue it had unfairly been compared to those in cities that have not properly funded their pension accounts.